Asian shares closed sharply lower Wednesday. China's Shanghai Composite Index plunged 3.1% to close at 3,173 and Hong Kong's Hang Seng Index fell 2.6% to 21,749. In Japan, the Nikkei 225 Index sank 1.3%, ending the day at 10,735.In a bold move, the People's Bank of China raised the amount of cash that banks must hold in reserve in proportion to the loans they make by 50 basis points beginning Jan. 18. This sudden tightening of monetary policy is intended to put a damper on excessive lending, which has flooded the market with liquidity, helping to drive up the Chinese economy, but also setting off alarm bells that higher interests rates are not far off. Many expected such a move later in the year, and the suddenness of the move shook the markets.

In Hong Kong, it was the same story, with shares in Mainland Chinese banks sliding. Hong Kong banks also declined: HSBC, the most heavily weighted stock on the Hang Seng, fell 1.6% and Standard Chartered (SCBFF) slid 1.7%.

Hong Kong real estate shares sank today. In a market propped up in part by flush speculators from the Mainland snapping up luxury properties in the territory, less liquidity is not welcome news for property developers. Henderson Land (HLDVF), which last year allegedly sold the most expensive property in the world to a Mainland buyer, plunged 6.5%. Hang Lung Properties dropped 4% and Sun Hung Kai fell 3.7%. Developer Country Garden, owned by the richest woman in China and specializing in luxury homes, retreated 4% and Glorious Property, developer of high-end buildings, lost 3.9%.

In Japan, where a new report shows that corporate bankruptcies dropped by 1.1% last year, Japan Airlines (JALSY) doesn't look like it will be following that trend. The airline's stock plunged 81%, falling to a perilous 7 yen per share with Bloomberg reporting that it has lost about $2.5 billion in market value in the last week. It is looking likely that the beleaguered airline will be heading into bankruptcy court for restructuring, which may include deals with either American Airlines or Delta. In what could be Japan's sixth-largest bankruptcy, already anxious Japanese investors could be in for more big losses.